Pressures on 1H'07 revenue growth will include Panama transition, MSN loss, Daum affiliate loss, higher TAC rates and, potentially, the recent management reorganization. Firm notes their are optimistic that new partnerships and branded ad network opportunities in 2007 will help offset some of the affiliate losses to Google. Internet advertising industry growth remains robust, external data indicates that Yahoo! is holding US query share, and Panama opportunity is large, which is the basis for their positive long-term view on the stock given current valuation.

Firm's base case scenario for Panama assumes 8.5% core 4-year EBITDA growth (excluding search monetization) and a 70% improvement in search query monetization from Panama over 4 years. In this scenario, they value the stock at $32 based on 13x 2008E EBITDA.